QUESTION: 49

Which of the following indicates the ratio between profit and costs?

Gearing
Margin
Mark-up
Liquidity

Answer(s): C

Explanation:

Mark up is the profit as a percentage of total costs. LO 3, AC 3.3

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QUESTION: 50

A company is considering entering a new market.
Which of the following are the external factors that influence the difference between cost and price of this company? Select THREE that apply

Procurement policy
Process efficiency
Business strategy
Threat of substitution
Competitiveness of the market
Relative bargaining power of supplier and purchaser

Answer(s): D,E,F

Explanation:

The difference between cost and price is profit. According to Michael E. Porter, the profitability of an industry is shaped by five forces:
1. Competition in the industry
2. Potential of new entrants into the industry
3. Power of suppliers

4. Power of customers
5. Threat of substitute products
The

Reference:

CIPS study guide page 167 LO 3, AC 3.3

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QUESTION: 51

Which of the following are features of performance specification?
1. Method of achieving the buyer's desired result
2.
What needs to be achieved when using the product
3. Purposes of the product
4. Technical and physical characteristics of the product

2 and 4 only
1 and 2 only
1 and 4 only
2 and 3 only

Answer(s): D

Explanation:

There are 2 major types of specifications:
1. Performance specifications
These are Specifications that define the purpose of the goods or services in terms of how effectively it will perform. Performance is a logical extension of function. Performance specifications define the task or desired result by focusing on what is to be achieved. They do not describe the method of achieving the desired result.
2. Technical (or conformance) specifications
These are Specifications that define the technical and physical characteristics and/or measurements of a product, such as physical aspects (e.g. dimensions, colour, and surface finish), design details, material properties, energy requirements, processes, maintenance requirements and operational requirements. They are used when functional and performance characteristics are insufficient to define the requirement and are often used for engineering and information technology requirements.

Reference:

- Specification Writing
- CIPS study guide page 9-11 LO 1, AC 1.1

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QUESTION: 52

Southwark is negotiating a contract with Orchard to provide software and IT services. Orchard will manufacture and install the products which are contractually supplied by IBM. Southwark's procurement manager is worried that during the contract there would be some problems that they would not able to claim for damages from Orchard.
Which of the following should be included in the head contract so that Southward can sue IBM, should the need arise?

Negligence
Indemnity
Collateral warranty deed
Insurance

Answer(s): C

Explanation:

A Collateral Warranty is a contract under which a consultant, a building contractor or a sub- contractor warrants to a third party that is has fulfilled its obligations under its professional appointment, building contract or sub-contract. The purpose of a Collateral Warranty is to give a third party, who is not a party to the original contract, rights to enforce that original contract. In this case, IBM is the subcontractor, then purchaser can use collateral warranty deed to bind them.

Reference:

- Collateral Warranties an Overview
- CIPS study guide page 39-40 LO 1, AC 1.2

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QUESTION: 49

Explanation:

QUESTION: 50

Explanation:

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QUESTION: 51

Explanation:

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QUESTION: 52

Explanation:

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